Tariff Effects on Imports and Revenue

Steps:

• Locate world price (PW); imports before tariff equal consumption minus domestic production at PW.
• Apply tariff, raising domestic price to PT; recalculate consumption (decreases) and production (increases).
• Imports after tariff equal new consumption minus new production, smaller than before.
• Tariff revenue is tariff amount times post-tariff imports, shown as a rectangle.

Why D is correct:

• In standard diagrams, Q3 labels pre-tariff imports (QD1 - QS1), Q4 post-tariff imports (QD2 - QS2), and QUTR the revenue rectangle (t * Q4).

Why the others are wrong:

• A: Q0 misidentifies pre-tariff imports; PTUS confuses revenue with price.
• B: Q1 and Q3 label domestic quantities, not imports; QTR mismatches revenue area.
• C: Q2 and Q3 mix consumption/production with imports; PUTS denotes price, not revenue.

Final answer: D